Amazon's Counterfeit Crackdown: What It Really Means

With trust threatening to waver, Amazon is eager to be seen as taking its fake-goods problem seriously.

For consumers shopping on Amazon.com, the prevalence of counterfeit merchandise is a nuisance. For entrepreneurs trying to build a business through e-commerce, it's a life-or-death matter. And Amazon's response to the problem to date has left many of them feeling like the retail giant doesn't much care about their plight, as several of them told me when I explored the issue for a feature in the March/April issue of Inc.

But Amazon wants sellers to feel that it takes their concerns seriously, and now it's dangling something they've been demanding for years: the ability to shut down counterfeit product listings themselves rather than having to report them and wait for a response. That's one of the promises of Project Zero, the name Amazon has given to its newest anti-counterfeiting initiative. (The company has long claimed it has "zero tolerance for the sale of counterfeit items on our site," even if its actions didn't always square with those words.)

Just how big a deal is Project Zero? Will it finally put an end to the Kafka-esque ordeals of startups like RGK Innovations, whose Brush Hero cleaning device--as I detailed in my feature--was rapidly cloned by China-based fraudsters after its creators appeared on Shark Tank?

If so, it's unlikely to be quick or neat. For one thing, Project Zero's protections aren't yet widely available. Amazon has been running a pilot program with 15 selected brands for several months to test it out. Now it's opening it up, but brand owners have to apply to be added to the waitlist, and Amazon isn't saying how long they'll have to wait.

Functionally, that makes Project Zero not much different from what's known as gating or brand restriction, a practice whereby brand owners can control who can sell their products. Amazon established brand gating at the behest of powerful companies like Nike, which refused to sell on Amazon until it was granted the right of approval over third-party sellers in 2017. But Amazon doesn't make gating available to any brand that asks for it or publish criteria required to be eligible for it.

Another aspect of Project Zero is called "product serialization," which involves creating unique barcodes for every individual unit; items claiming a protected brand but lacking the barcode can be identified as they pass through Amazon warehouses and seized.

But serialization isn't totally new. Last year, Amazon began offering a similar-sounding service called Transparency, which is part of the Brand Registry 2.0 program. It's a moneymaker for Amazon, with the codes costing a few cents per item, although sellers who print their own codes don't have to pay. Product serialization will have a per-unit cost based on volume.*

There are signs that Amazon is increasingly worried that the abundance of fake goods on its platform threatens to damage the trust consumers place in it. This month, in its latest annual report to shareholders, the company identified counterfeiting as a risk factor that could negatively impact sales.

Kevin Williams, RGK Innovations' CEO, told me "I love the idea" of being able to remove counterfeit item listings himself. It would certainly have saved him many hours of back-and-forth with representatives of Amazon's marketplace managers.

But he noted that other tools and tactics Amazon has introduced to curb counterfeiting have been abused in ways Amazon failed to foresee. Scammers have been known to flag legitimate sellers as offering counterfeit or defective goods in order to get their privileges suspended so they can "hijack" valuable product listings. "I imagine the rollout will have a boatload of unforeseen consequences," Williams says.

With Amazon, that's usually a safe bet.

*This article has been updated to reflect new information about the relationship between Transparency and product serialization, which are separate programs.